Global investors increasing their engagement efforts on the sustainability of palm oil producers
Jakarta, September 20, 2016
In early September the PRI and WWF Indonesia / WWF International, with support from CLSA, arranged a trip for 22 global investors to meet with local palm oil companies and federal and provincial government in Indonesia.
Investors spent three days discussing the challenges faced in making the palm oil industry more sustainable, ensuring investors understood the opportunities and challenges facing the industry.
“As part of our commitment to responsible ownership of the companies in which we have shares, the PRI Investor Working Group on Sustainable Palm Oil regularly engages with listed palm oil companies.
“This trip was an excellent opportunity to bring a selection of these investors to Indonesia to engage with local companies and stakeholders in person, and gain an enhanced understanding of the practical workings of the industry,” explained Mark Mills, Chair of the investor working group and Partner, Generation Investment Management.
The importance of driving sustainable practices in the palm oil industry is an issue gaining increasing traction with global investors. The complexity of sustainability risks and opportunities in the sector meant the trip gave participants an opportunity to gain a more nuanced and thorough understanding of the material issues than would have been possible through analysis of company disclosures and third party research.
WWF-Indonesia sees this as an exemplary step from investors.
“Indonesia is the world’s largest producer of sustainable palm oil and it has been difficult to ensure its long-term viability.
“Non-compliant producers will have greater impetus to use sustainable practices thanks to investor commitment to the longevity of the industry,” said Irwan Gunawan, Deputy Director Market Transformation, WWF-Indonesia.
During the trip investors also met with government representatives and a group of smallholder farmers. Smallholders produce around 40% of Indonesia’s total palm oil supply and investors recognised that increasing the yield and supply of responsibly produced fresh fruit bunches from them is crucial to ensuring the sector’s ongoing viability. Investors also met with various representatives of the Indonesian and Riau government to emphasise the importance of a regulatory framework that fosters sustainable growth and provides confidence to global investors.
With enhanced knowledge about palm oil and its sustainability issues, investors will continue to integrate sustainability risks and opportunities in their engagement with companies and investment processes.
PRI is currently supporting investor engagement with a selection of palm oil growers and traders to seek improvements in policies and practices that support the sustainability of the industry. A more detailed report on the trip and the next steps for PRI’s investor working group on sustainable palm oil will be published in the coming months.